Cash Back At Closing Scams

Florida leads the nation in fraud relating to real estate and mortgages, and it has been that way for a few years. The unfortunate reality is that some Agents have been, or may unwittingly become involved in real estate fraud. Especially in a softening market, or buyer’s market, many agents are eager to close a transaction, and even more so if the offer coming in seems too good to pass up. Purchase and Sale offers can come with many legitimate contingencies, including credits and debits between the buyers and sellers. Illegal cash back scams should not be confused with legal closing cost assistance or other incentives. One example of a possible illegal cash back scam would be:

Your home, which is in fair condition, is for sale priced at $300,000 and it has been on the market for 6 months. Out of nowhere a buyer shows up and is willing to offer $375,000. The contingency is that the “extra” $75,000 is to be given back to the buyer (or other 3rd party). The appraisal comes back at $375,000. You may think, “What's the harm? At least we’ll get the house sold and get our $300,000”. This scenario could put you on the path to get into a lot of legal trouble. Talk with your Realtor®, call the lender, and the state regulating agencies in the real estate industry. All parties in a real estate transaction (especially the lender and Agents) must be aware of, and fully account for all funds.

Below is just a simple overview of some of the indicators that you may be getting drawn into an illegal transaction.

Warning Signs/Red Flags:
-A buyer offers significantly more than the current list price on the condition that you kick that “extra” money back to the buyer or a third party.
-The appraisal comes back grossly over recent sales activity in that neighborhood for comparable homes.
-The buyer and/or their Agent have never personally seen the home.
-The buyer and/or their Agent adamantly requests (sometimes insists as a contingency of the offer) to use a title company different from the one you have chosen.
-The buyer and/or their Agent claims the “extra” money will be used for repairs.
-The buyer’s Agent asks the Listing Agent to increase the list price in the MLS.

There are many different forms of real estate and mortgage fraud. Do your part to be informed and become educated on the ways you can protect yourself.